Politicians have a genius for creating unintended consequences with each of their new firefighting measures. Just consider bank regulations. Today, reportage by Brooke Masters in the Financial Times informs us that the bill for new bank regulations in the EU could balloon to 50 billion euros. These regulations are intended to make banks “safe.” But, alas, they will suppress the money supply and economic activity. In consequence, new bank regulations, in the middle of an economic slump, promise to make banks less, not more, “safe” — a doom loop. Now is not the time to send in the Boy Scouts.

The Supreme Court has now decided the Montana Supreme Court’s effort to overturn or to constrain Citizens United. As many expected, the Montana Court has been reversed without having a formal briefing and argument.

The five justices who decided Citizens United also decided this case. The four dissenters included Justice Stevens’ replacement, Justice Kagan. The majority found the case to be uncomplicated:

The question presented in this case is whether the holding of Citizens United applies to the Montana state law. There can be no serious doubt that it does. See U. S. Const., Art. VI, cl. 2.

They refer to the Supremacy Clause: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

If judges in every state are bound by the Constitution and thus, the First Amendment, didn’t the Montana judges act contrary to their constitutional obligations?

The dissenters disagree with Citizens United and would have overturned it or allowed Montana to violate the First Amendment.

The party of government has long believed in the supremacy of the Supremacy Clause. For them moral progress is measured by increases in the scope and power of those who reside inside the Beltway. The four dissenters have found an exception to such centralization. No doubt their turnaround depends on new research into the meaning of the Fourteenth Amendment.

This decision should remind everyone that if one justice in the Citizens United majority leaves the Court, and President Obama selects his replacement, Citizens United will almost immediately be overturned.

We should all be so lucky as to have our crises be like the looming interest rate change on some student loans. Yes, the rate on subsidized federal loans will double on July 1 absent congressional action, but that needs to be put into context to see that it’s a potential “crisis” — as I heard it described on a radio news report last Friday — akin to your yacht sinking. Your toy, bathtub yacht.

Starting July 1, rates on subsidized loans — a subset of federal loans in which taxpayers eat beginning interest payments as well as bearing non-repayment risk — are set to rise from 3.4 percent to 6.8 percent.

That might sound bad, but note that the rates have only been at 3.4 percent for a year. A 2007 law set them on a gradual decline from 6.8 percent to 3.4 percent over five years. So it’s not like 3.4 percent has been the norm for decades…or even two years.

Next, the rate increase will only affect loans originated after July 1. People with existing loans won’t suddenly see the rates on all their subsidized loans double.

Third, while a rate doubling sounds big, the practical effect according to the White House’s own calculations will be to add about $1,000 to an average loan over its lifetime, which is about ten years. That translates into an additional $8.33 per month — less than the cost of a DC movie ticket.

Finally, freezing the rate for another year will do almost nothing for currently suffering middle-class families, unlike what the White House intimated in President Obama’s most recent weekly address. The large majority of loans originated after July 1 won’t even begin to be repaid for at least another year-and-a-half, after rising seniors have graduated and gone through the six-month repayment grace period.

It’s well known that a crisis is extremely useful for affecting political change — just ask Chicago’s mayor – but it often translates into bad policy. And that’s exactly the kind of policy that creating artificially cheap student loans is. They help fuel skyrocketing college prices, subsidize massive college waste, and contribute to millions of people enrolling who either never complete their studies or who finish largely worthless degrees.

All those consequences are problems that Washington really should worry about. But that’s the other thing about a crisis: It’s usually only embraced when it means giving stuff away to buy lots of votes.

We’re saddened to note that William H. Peterson, a longtime friend of the Cato Institute, died this week at 91.

Bill was a student of Ludwig von Mises at New York University, where he received his Ph.D. in economics in 1952. He was later professor of economics in the Graduate School of Business Administration at NYU; Scott L. Probasco. Jr. Professor of Free Enterprise and director of the Center for Economic Education at the University of Tennessee at Chattanooga; and Lundy Professor of Business Philosophy at Campbell University in North Carolina. He also worked in business, consulted with governments around the world, and wrote a book review column for the Wall Street Journal. In 1982, he lectured on free-market economics in Romania, East Germany, Ireland, and Canada. He wrote an essay on Mises that appeared in the 1971 book Toward Liberty: Essays in Honor of Ludwig von Mises, edited by F. A. Hayek.

In recent years he reviewed books, including many Cato Institute books, for the Washington Times. I’m pleased to have published his article “Is Business ‘Administration’?” in Cato Policy Report in 1983, in which he made the case that business is “dynamic, competitive, synergistic, literally wealth-creating”—entrepreneurial, not merely administrative—and therefore the coveted MBA degree is misnamed and perhaps wrongly taught.

Bill’s wife of 62 years, Mary Bennett Peterson, died last year. She also studied with Mises at NYU. She worked as a stockbroker, a foundation officer, and a lobbyist for General Motors. She also wrote a book, The Regulated Consumer, that was ubiquitous among libertarians and conservatives in the 1970s. She criticized such agencies as the Interstate Commerce Commission and the Civil Aeronautics Board for harming consumers, helping to set in motion a policy agenda that resulted in deregulation of both airlines and trucking.

Last month George Will pushed back against the bipartisan Washington wish for bipartisanship:

Bipartisanship, the supposed scarcity of which so distresses the high-minded, actually is disastrously prevalent.

Since 2001, it has produced No Child Left Behind, a counterproductive federal intrusion in primary and secondary education; the McCain-Feingold speech rationing law (the Bipartisan Campaign Reform Act); an unfunded prescription drug entitlement; troublemaking by Fannie Mae and Freddie Mac; government-directed capitalism from the Export-Import Bank; crony capitalism from energy subsidies; unseemly agriculture and transportation bills; continuous bailouts of an unreformed Postal Service; housing subsidies; subsidies for state and local governments; and many other bipartisan deeds, including most appropriations bills.

And today I see this banner headline in the (actual paper edition of the) Washington Post:

In Senate, farm bill produces a rarity: cooperation
Some see signs of renewed bipartisanship

Paul Kane reports:

To the purported short­list of certainties in life — death and taxes — add large, bipartisan support in the Senate for the farm bill.

Despite the pattern in recent years of intense partisan acrimony, backroom bickering and publicly staged fights over nearly every piece of legislation, the Senate has begun to plod through a nearly $1 trillion farm bill that is likely to get a bipartisan vote for its approval by week’s end.

A trillion dollars. For a farm bill. Have we become so accustomed to throwing around the phrase “a trillion dollars” that this isn’t headline news? Not to worry, though, Congress is thinking of the taxpayers: They say they’ve cut $23 billion out of the trillion. Sure, let’s look back in a decade and see if those cuts really happened.

Meanwhile, shoveling out money to the farmers isn’t the only time Congress can be bipartisan. There’s also shoveling out money to Boeing and a handful of other big companies with the Export-Import Bank, as the Los Angeles Times reported on May 30:

President Obama has signed into law a bill reauthorizing the Export-Import Bank, saying the rare example of bipartisan cooperation should be a model for a future legislation.

Yessiree, as George Will said, the one thing Congress can join hands and agree on is giving taxpayers’ money to interest groups — whether it’s farmers or airplane manufacturers or college students and their parents or Medicare recipients. Bipartisanship is typically a conspiracy against the taxpayers.

By a vote of 76–1, the lower house of Paraguay’s Congress impeached President Fernando Lugo this morning for his role in a deadly clash last week between the police and squatters. The Senate is in session right now holding the political trial and Lugo is expected to testify tomorrow in his defense. However, since the upper house of Congress is controlled by the opposition, it’s very likely that a required two-third majority will vote to remove Lugo from office.

This impeachment process is in accordance with article 225 of the Paraguayan constitution, which states that high ranking government officials such as the president can be impeached for “poor performance of his duties.” As we can see, the constitution is very vague in stipulating the reasons why an official can be removed from office, so it is up to two-third majorities in both houses of Congress to decide.

Removing Fernando Lugo from office could be a premature decision, or an example of bad politics in a country where politicians excel in doing wrong. I won’t discuss those details here. However, it is a perfectly legal and constitutional move.

This is why it is unacceptable that Unasur, a union of twelve South American governments, is threatening to treat Lugo’s possible removal from office as a coup. The secretary general of Unasur has even said that neighboring countries would have the power to invoke the Ushuaia II treaty, which contemplates sanctions against a country where “the democratic order has been breached.” Sanctions include shutting down the borders (a particularly significant threat to a landlocked country such as Paraguay), and suspending communications, trade and energy supplies. It is important to note that Paraguay gets 95% of its energy from the Itaipú and Yasyreta hydroelectric dams that it shares with Brazil and Argentina, respectively. Thus, it is highly vulnerable to a shutdown.

Unasur should back off from interfering in the impeachment process against Fernando Lugo. And the U.S. should unequivocally call for respect for Paraguay’s constitutional order.

I’m not a fan of David Cameron, the United Kingdom’s Prime Minister.

Even though he belongs to the Conservative Party that produced the great Margaret Thatcher, Cameron seems to be a bit of guilt-ridden statist with his finger always in the air to see which way the wind is blowing. The policy results are not pretty.

• Cameron has undermined the U.K.‘s system of personal retirement accounts.
• Cameron is giving taxpayer money to statist environmental groups.
• Cameron has increased the capital gains tax.
• Cameron is increasing the burden of government spending.

Now I have another reason to dislike Cameron. He just condemned a comedian for legally seeking to minimize the amount of his income that is seized — and then wasted — by the U.K. government. Here are some of the details from The Telegraph.

Prime Minister David Cameron today branded the tax arrangement of comedian Jimmy Carr “morally wrong” after it emerged he was using a scheme which allows the wealthy to pay as little as one per cent of their income. …Speaking at the G20 summit the Prime Minister told ITV News: “I think some of these schemes — and I think particularly of the Jimmy Carr scheme — I have had time to read about and I just think this is completely wrong. “People work hard, they pay their taxes, they save up to go to one of his shows. They buy the tickets. He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax avoiding schemes. …some of these schemes we have seen are quite frankly morally wrong.” …Lawyers for the comedian have…categorically denied any wrongdoing, saying the scheme had been disclosed to the relevant authorities in line with the law. …Chancellor George Osborne has claimed he was left “shocked” after finding the extent to which multi-millionaires were exploiting tax loopholes and vowed to take “action”.

div I have no idea whether the specific “tax avoiding scheme” used by Carr is good tax policy (protecting against double taxation, for instance) or bad policy (such as a loophole that creates favoritism for a specific behavior), but that’s not the point of this post.

Instead, this is a moral question about whether people have some sort of obligation to pay extra tax, merely to get some sort of pat on the head from politicians. The same politicians, by the way, that squander the money on varying vote-buying schemes that undermine prosperity and create dependency.

I’d be willing to condemn Carr if I found out he’s some sort of statist who wants higher taxes for everybody else, but then (like John Kerry) takes steps to minimize his personal tax bill.

But I’d be condemning Carr for hypocrisy, not criticizing the idea of tax avoidance.

The United Kingdom has become a bloated welfare state (with horribly depressing implications, as you can read here and here). If people want to be moral, they should strive to pay the least amount possible to this corrupt and wasteful enterprise. The United States is not quite as bad (yet), but the same principle applies.

Politicians, needless to say, will violently disagree with this ethical viewpoint. So we can all expect more taxes, higher taxes, and additional draconian enforcement measures.

The only good news is that the Laffer Curve will prevent these greedy thugs from collecting nearly as much money as they think.

P.S. To get an idea of how the Conservative Party has declined, compare Cameron’s statist rhetoric to Margaret Thatcher’s comments that “there is no such thing as public money.”